Wednesday, February 24, 2016
IMF warns global economy is vulnerable; Brazil stripped of investment grade status; India still blighted by caste issues
1 IMF warns global economy is vulnerable (BBC) The International Monetary Fund (IMF) has said the global economy has weakened further and warned it was "highly vulnerable to adverse shocks". It said the weakening had come "amid increasing financial turbulence and falling asset prices".
It said China's slowdown was adding to global economic growth concerns. China's economy, the second-biggest in the world, is growing at the slowest rate in 25 years. "Growth in advanced economies is modest already under the baseline, as low demand in some countries and a broad-based weakening of potential growth continue to hold back the recovery," the Washington-based IMF said.
"Adding to these headwinds are concerns about the global impact of China's transition to more balanced growth, along with signs of distress in other large emerging markets, including from falling commodity prices."
The IMF also noted any future prospects for global growth "could be derailed by market turbulence, the oil price crash and geopolitical conflicts". Earlier this year, the IMF downgraded its forecast for global economic growth. It now expects economic activity to increase 3.4% this year followed by 3.6% in 2017.
2 Brazil stripped of investment grade status (San Francisco Chronicle) Brazil's battered economy took another blow on Wednesday when Moody's became the last of the three major credit ratings agencies to strip the country of its investment grade status.
The agency lowered Brazil's ratings by two notches, from Baa3 to Baa2 with a negative outlook. Fitch Ratings lowered Brazil into junk territory in December, mirroring a similar move by Standard & Poor's in September.
In a note accompanying its decision, Moody's said the downgrade was driven by worries over an increase in government debt "in a low-growth environment" and the country's "challenging political dynamics".
The agency said it expects the government's debt to exceed 80 percent of gross domestic product within the next three years and for the economy to contract by an average of 0.5 percent a year through 2018.
Last week, Brazil's central bank published statistics showing that the economy shrank over 4 percent in 2015. On Thursday the Organization for Economic Cooperation and Development forecast the country's GDP would contract by a further 4 percent in 2016. The gloom over the country's economic prospects is compounded by the poisonous atmosphere in congress, where the government is struggling to win support for its austerity measures.
A long-running corruption scandal at the state-run oil company, Petrobras, has implicated dozens of senior politicians and many of the country's top business executives. President Dilma Rousseff also faces impeachment proceedings over claims she used public banks to plug budget gaps, as well as accusations that she used illicit funds to finance her 2014 re-election campaign.
2 India still blighted by caste issues (Priya Virmani in The Guardian) It’s now four days since Delhi was paralysed by members of the Jat caste. Unrest is so common in India that I heard one local complain, “At least the protestors could have given us the weekend off,” but the situation has been dire. Most of the city was left without water after rioters vandalised the Munak canal. Schools have been closed. At home, people have had to skip bathing and washing clothes.
All this must seem baffling to non-Indians. To the outside world, the idea of caste belongs firmly in the past. It is no secret that the dalit caste, once known as “untouchables”, were and still are the victims of shocking discrimination, but the community at the centre of the current disturbances, the Jats, are fairly prosperous landowners.
They come from the northern Indian state of Haryana, which surrounds Delhi on three sides. Though still fairly prosperous, they are feeling the pinch because of population growth, which has reduced the size of their farm holdings, and two successive years of drought and failed crops.
They are now demanding that the government give them the official status of “backward class”. Under India’s system of affirmative action, colloquially referred to as “reservations” or the “quota system”, this would allow Jats access to jobs and university places set aside for those from the lower castes.
Independent India inherited a historically rooted caste system that was notorious both for its rigidity and for its efficiency in maintaining the existing power structures. For millennia, an individual’s socio-economic position could only be inherited and never acquired. It was to address this long-standing injustice that the Indian constitution, which came into effect in 1950, incorporated a system of affirmative action.
Over decades the original “backward classes” have been joined by many better-off castes in politically motivated moves that have discredited the quota system, as well as reducing its effectiveness. With Jats comprising more than a quarter of Haryana’s voters, it is hardly surprising that the state’s politicians have spent 20 years wooing them with promises of affirmative action.
For now, the government has agreed to the Jats’ demands. This has brought a degree of calm. More than peace, what the government is attempting to buy here is Haryana’s votes. Jats played a crucial part in the BJP’s victory in the 2014 general elections. At the same time, everyone involved knows that India’s supreme court could overturn any change to the Jats’ status, as they do not fundamentally qualify as a “backward class”.
The execution of affirmative action in India has been complex, messy and overarchingly politically motivated. What is clear from this latest debacle is that its current guise is not fit for 21st-century India.